Select Committee on Innovation, Universities, Science and Skills Written Evidence

Memorandum 52

Submission from the Energy Saving Trust

  1.  Unless the energy that we use is cleaner, Britain will be hard-pressed to hit its aggressive CO2 reduction targets, even with a massive increase in our efforts to reduce energy demand. "Macro" renewable projects for electricity generation—like wind farms and tidal schemes—are on the up, thanks to the "Renewables Obligation". But despite this, only 4.6% of the UK's electricity came from renewable sources in 2006. There is still a long way to go. However, electricity-generation is only a small part of the problem: three-quarters of the energy we use at home is for heating and there is currently no way of creating a large-scale, carbon-neutral solution for home heating.

  2.  Producing energy at a domestic level has huge potential for CO2 reduction. It could create a more diverse energy supply, in an age when energy security is a major worry. It creates none of the waste that happens when energy is transported long distances (centralised power stations lose over 60% of their "primary" energy as waste heat and in transmission losses). And microgeneration can help to tackle fuel poverty, particularly in "hard to treat" properties.

  3.  But, how do you get consumers to invest in technologies whose full benefits they find difficult to appreciate or realise, whilst others find it difficult to afford them? For most people, microgeneration is a lifestyle choice rather than a hard-headed commercial decision.

  4.  This submission builds on our previous submission to the Science and Technology committee. Since that submission, we have completed further modelling work. In this recent work, reported in "Generating the Future" (document can be found at we find that a judicious blend of policies and incentives could deliver huge carbon savings for a fraction of the 1% of GDP that the Stern review suggests is needed.

Where is microgeneration now?

  5.  Grant systems like the Low Carbon Buildings programme are helping microgeneration to grow—but at a painfully slow pace. Despite rising interest in solar PV and thermal, micro- wind and ground source heat pumps, there are currently only 100,000 installations out of potential millions.

  6.  Consumers are positive about renewable energy. A survey of over 6,000 individuals revealed that two-thirds favoured renewable electricity, 44% opting for "macro" and 24% for microgeneration—and with wind and solar the preferred sources. Most respondents to this survey thought that government was responsible for ensuring energy sustainability and should subsidise renewable energy.

  7.  However, the barriers to microgeneration ensure that this public enthusiasm does not translate into action. Most technologies are expensive; many are hemmed in by red tape, like the planning laws and the complexities of selling electricity back to the grid. Consumer understanding of the technologies is low. And developers and suppliers have few incentives to invest and commit.

  8.  The detailed modelling that underpins "Generating the Future" shows that no single policy will encourage the kind of mass adoption of microgeneration that is needed to get results. However our research shows that a combination of different policies, providing incentives to both consumers and providers, could drive massive carbon savings from microgeneration.

  9.  A successful policy scenario:

    —  Mandate for one heating microgeneration technology to be installed (instead of a conventional boiler) at time of replacement.

    —  Make wind, solar or PV compulsory on new builds.

    —  Offer a 30% grant to retrofit renewable technology into existing buildings.

    —  Provide 10-year, low-interest loans on all microgeneration technologies.

    —  Make sure that electricity from renewable sources can be sold back at the same price consumers pay for grid electricity.

    —  Apply a carbon tax of £20 for each tonne of CO2.

  10.  When this combination of policies is applied, micro-CHP (combined heat and power), currently an emerging technology, becomes the heating system of choice by 2050. Air-and ground-source heat pump would be installed in large numbers, along with biomass boilers and solar thermal, wind and PV. All of which would add up to national CO2 savings of around 60%.

  13.  A direct subsidy cost of £200 million and a total annual cost of around £3 billion (excluding all benefits) by 2020 is a small price to pay compared to the £13 billion cost implied by Stern's recommendation that 1% of GDP is needed to mitigate climate change.

Policies required to make microgeneration succeed

  14.  Regulation is required to take the least efficient heating products off the market and make low-carbon replacements compulsory. Our research suggests that regulation has huge potential to encourage microgeneration. It is the only policy that would work on its own and the most effective way to apply it is at specific points in the life of a building, such as boiler replacement. In the longer term, more radical measures mandating installation at sale or re-roofing should be applied.

  15.  Price carbon at least £20/tonne of CO2. A carbon price that reflects its social cost would not work in isolation but would help microgeneration as part of a package of measures.

  16.  Change consumer decision-making—provide "soft loan" purchasing options that offer real savings to consumers. These could apply to equipment bought directly or via energy supply companies.

  17.  Raise awareness and change attitudes—run an awareness programme that motivates consumers to include environmental factors when making investment decisions. "Forward-looking" consumers who currently buy microgeneration are prepared to invest out of concern for the environment and accept long payback times.

  18.  Provide information and advice—set up an independent advice service on microgeneration. The subject is fraught with technical and regulatory complexity, which frightens off potential adopters. Practical, usable guidance is needed.

  19.  Help householders to understand the Energy Performance Certificate (EPC) process. The value of a house will one day reflect its energy performance, encouraging home-owners to take action. Raising awareness of EPCs will help his process along.

  20.  Increase the value of subsidies, particularly in the early years. Subsidies need to be at considerably higher levels than presently planned (post current grant support) to encourage mass-market take-up of microgeneration.

  21.  Heat measures—give heat- microgeneration technologies an "uplift" under the Carbon Emissions Reduction Targets (CERT). A subsidy of 30% is required for substantial carbon savings.

  22.  Electricity measures—provide a guaranteed "feed-in" tariff; or create a "Microgeneration Obligation". The former gives an attractive price for microgenerators to sell at and the latter will help to incentivise technology developers and suppliers, in the same way that the "Renewables Obligation" has boosted "macro" renewable schemes such as wind farms.

  23.  Use the Environmental Transformation Fund to support household generation; and support early commercialisation measures such as field trials. Grant support is all very well, but it tends to support the lowest-cost technology rather then helping others to develop. Field trials are essential to refine microgeneration technologies before they are released to a wider market.

  24.  Provide a clear framework—set out plans that encourage companies to invest. Without certainty of the direction government policy will take, businesses will be reluctant to commit to microgeneration technologies.

  25.  Invest in peripheral technology issues—using existing technologies more carbon- efficiently, exploring energy storage and looking at ways of rewarding peak demand reduction: Investment in these areas, perhaps through the Environmental Transformation Fund, will help to support microgeneration too.

  26.  Link into grid de-carbonisation—create a unified policy for domestic microgeneration. Linking together the grid, community scale solutions and microgeneration will ensure that CO2 savings are achieved at lowest cost.


  27.  Microgeneration holds out huge potential for revolutionising the way the UK produces energy and for carbon savings. But without a carefully considered policy approach, we could miss the important—and extremely cost- effective—way of hitting the UK's CO2 obligations.

January 2008

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